Maryland’s ‘Educational Affiliates’ Agrees to Pay $13 Million to Settle False Claims Act Allegations

Federal Student Financial Aid is the largest provider of funding for American college students in the United States. These funds have paid approximately $150 billion in grants, work-study funds, and financial aid to 13 million students. Like all federal money, these funds come with strings attached and universities are required to abide by certain criteria in exchange for their acceptance of federal tax dollars on behalf of enrolled students. One such criteria is that students meet basic eligibility standards, including graduation from secondary school and acceptable academic performance while enrolled in college.

In today’s case,^[1] we review a recent settlement between the for-profit Educational Affiliates, Inc. and the Department of Justice. According to the allegations, Educational Affiliates accepted federal financial aid dollars, but did not ensure its students met necessary criteria for acceptance of such funds. The company is also alleged to have accepted illegitimate high school diplomas from a “diploma mill” at one of its Florida campuses.

In total, the company will pay $13 million — $1.8 million of which will go to five whistleblowers who came forward with their allegations under the qui tam provisions of the False Claims Act.

Details of the allegations against Educational Affiliates

Educational Affiliates is based in White Marsh, Maryland – an area located in the Baltimore-Washington metropolitan region. It is a for-profit company that manages several trade-orientated, post-secondary programs, known more specifically as All State Career, Fortis Institute, Fortis College, Tri-State Business Institute Inc., Technical Career Institute Inc., Capps College Inc., Driveco CDL Learning Center, Denver School of Nursing, and Saint Paul’s School of Nursing. The institutions are located in five states: Alabama, Florida, Maryland, Ohio, and Texas.

According to the Department of Justice’s allegations,^[2] Educational Affiliates fraudulently altered admission test scores, created fake high school diplomas, and assisted students in falsifying their applications for federal financial aid. In addition, the group is alleged to have referred students to “diploma mills,” which offered unaccredited high school diplomas online. The violations were so egregious, several members of the Baltimore All State Career campus were charged with federal crimes stemming from the transactions.

In addition to the falsification of student eligibility data, three campuses located in Birmingham, Alabama, Houston, and Cincinnati had imposed a financial incentive on admissions counselors to bring in as many students as possible, regardless of eligibility. Pursuant to this plan, personnel were instructed to entice students with inflated graduation and job placement rates.

The U.S. Department of Education said in a statement, “The various cases that were settled here include numerous allegations of predatory conduct that victimized students and bilked taxpayers….In particular, the settlement provides for repayment of $1.9 million in liabilities ordered by Secretary of Education Arne Duncan that resulted from EA awarding federal financial aid to students at its Fortis-Miami campus based on invalid high school credentials issued by a diploma mill. Secretary Duncan made clear that such abusive behavior would not be tolerated, and we will continue to work with the Justice Department and other federal agencies to ensure that postsecondary institutions face consequences when they violate the law.”

Contact Berger Montague today

If you are aware of similar misconduct within the education sector, please do not hesitate to contact Berger Montague right away.